5 Control of the works
5.1 The contract administrator’s duties to the employer are normally set out in an appointment document, frequently on a standard form produced by one of the professional institutions. The contract administrator’s role within the construction contract, however, is to be determined solely from the construction contract terms. IC16 places various duties on the contract administrator, for example to supply necessary information and to issue certificates or statements, and it also confers on the contract administrator a wide variety of powers, such as the power to issue instructions (see Tables 5.1 and 5.2). In some matters the contract administrator will act as agent of the employer, for example when issuing instructions which vary the works, and, in others, as an independent decision-maker, e.g. when deciding on claims for direct loss and/or expense. When making a decision between the parties, it would be implied that the contract administrator must act fairly at all times. Furthermore, clause 1.11 now requires that all consents or approvals shall not be unreasonably delayed or withheld (except in relation to clause 7.1, assignment).
Table 5.1 Key powers of the contract administrator
Table 5.2 Key duties of the contract administrator
5.2 Failure by the contract administrator to comply with any obligation, either express or implied, may result in the contractor suffering losses. The contract administrator is not a party to the contract, therefore if the contractor wishes to bring a claim, this would, in the first instance, have to be against the employer. It is likely, however, that any failure to administer the building contract according to its terms would be a breach of the contract administrator’s duties to the employer, and therefore the employer may seek, in turn, to recover the losses from the contract administrator.
5.3 Direct control over the carrying out of the contract works, including the manner in which the works are undertaken, is solely the responsibility of the main contractor under the contract. The contract administrator will normally inspect the work at intervals. The duty to inspect arises not from IC16, which includes no express provision relating to inspection or monitoring of work by the contract administrator, but directly from the terms of appointment. Clearly, when the contract administrator is required under the contract to form an opinion on various matters, including the standard of work and materials prior to issuing a certificate, then it would be implied, even if not expressly set out in the terms of appointment, that some form of inspection must take place.
Person-in-charge
5.4 The contractor is required to keep a competent ‘person-in-charge’ on the site ‘at all reasonable times’ (cl 3.2). What would constitute ‘reasonable’ would depend on the nature and scale of the project, but as the JCT has chosen not to use the term ‘at all material times’, as in SBC16, it would appear that something less than full-time presence would be acceptable. There is no requirement in the contract conditions to have the person named, but, as this person may receive any instructions given by the contract administrator and therefore acts as the contractor’s agent, it would be good practice to establish the identity of the person in a pre-contract meeting, and make sure this is recorded in writing.
Employer's role
5.5 Although most of the administration of the contract is dealt with by the contract administrator, the employer has an active role to play. The employer is required to make decisions on various matters and to issue notices direct to the contractor and is entitled to exercise various powers (see Tables 5.3 and 5.4). Unlike SBC16, the form does not make provision for the employer to appoint a representative to exercise these functions. If such and appointment is necessary (perhaps because the employer may be too busy to deal with these matters or is frequently unavailable) then it should be made clear in the tender documents, and an appropriate amendment made to the form. To avoid any confusion in the roles, it may be sensible to appoint a separate person, and not the contract administrator, to act as the employer’s representative.
Table 5.3 Key powers of the employer
Table 5.4 Key duties of the employer
Clerk of works
5.6 The employer is entitled to employ an independent clerk of works whose duty ’shall solely be to act as inspector on behalf of the Employer under the Architect/Contract Administrator’s directions’ (cl 3.3). The presence of a clerk of works does not lessen the contract administrator’s own duty in respect of site inspection (Kensington Health Authority v Wettern) and the contract administrator should not treat the clerk of works as an agent carrying out work on behalf of the contract administrator. Unlike SBC16, IC16 does not refer to the clerk of works issuing directions, therefore the role is confined to inspection on behalf of the employer. It would be implied that the contractor should give the clerk of works reasonable access and facilities, but it might be sensible to make this clear in the tender documents, particularly if the clerk of works is to maintain a permanent presence on site.
Kensington and Chelsea and Westminster Area Health Authority v Wettern Composites (1984) 31 BLR 57
Wettern Composites was the sub-contractor for the supply and erection of pre-cast concrete mullions for an extension to the Westminster Hospital, on which the Health Authority had also engaged architects, engineers and a clerk of works. Tersons Ltd was the main contractor. The hospital was completed in 1965, and in 1976 it was discovered that there were considerable defects in the mullions. The Health Authority brought an action against the architects, engineers and sub-contractors, though the latter subsequently went into liquidation. Judgment was given for the Health Authority. The architects had failed to exercise reasonable skill and care in ensuring conformity of the works to the design. Although a clerk of works was employed, this did not lessen the architects’ responsibility. However, the Health Authority was vicariously liable for the contributory negligence of its clerk of works, and the damages recoverable from the architects were accordingly reduced by 20 per cent.
Principal contractor
5.7 The contract assumes that the contractor will act as principal contractor for the purposes of the Construction (Design and Management) (CDM) Regulations 2015, unless another firm is named in Article 6. It is the employer’s responsibility to appoint a principal contractor; therefore, if the contractor is unable to or ceases to take on this role, the employer must appoint a substitute (Article 6). It is the contractor’s responsibility to develop the construction phase plan so that it complies with the Regulations (regulation 12), and to ensure that the works are carried out in accordance with the plan.
5.8 The principal designer has no duty to inspect the works and would be very unlikely to visit the site unless some highly unusual circumstance arises, such as the discovery of an unanticipated hazard. The main responsibility for ensuring that correct health and safety measures are employed on site rests with the contractor, both under statute and under the express terms of the contract.
Information to be provided by the contract administrator
5.9 One of the key duties of the contract administrator under a construction contract is to supply the contractor with sufficient information to construct the works in accordance with its terms. In an ideal world, the contractor should be supplied with every piece of information required at the very start of the project but, in practice, this ideal is rarely achieved. Even if the works have been fully specified, it is likely, for example, that information regarding assembly, location, detail dimensions, colours, etc. will be needed by the contractor throughout the project. In many cases it will not have been possible to prepare this in advance as detailed information regarding the site, or perhaps in relation to named sub-contractor design items, will not have been available. In addition, circumstances may result in the need for a variation and the provision of revised or entirely new information to the contractor. Supply of information will usually form part of the contract administrator’s express or implied duties to the employer under the terms of appointment.
5.10 IC16 refers in three places to the contract administrator’s obligation to provide information. These refer to: setting-out information (cl 2.9); ‘information referred to in the Information Release Schedule’ (cl 2.10); and ‘such further drawings or details as are reasonably necessary to explain and amplify the Contract Drawings’ (cl 2.11.1). Although none of the information is required to be released under a ‘contract administrator’s instruction’, this is frequent practice – and wise, as it would enable the clause provisions to be brought into operation if necessary (see ‘Contract administrator’s instructions’, paragraph 5.32 below). If any of the information supplied introduces changes or additions to the works, it must be covered by a contract administrator’s instruction requiring a variation.
5.11 Under clause 2.9 the contract administrator is responsible for supplying sufficient ‘accurately dimensioned drawings’ and for determining levels to enable the contractor to set out the works. The contractor must, at no cost to the employer, ‘amend any errors’ that result from its own inaccurate setting out. Alternatively, the contract administrator, with the employer’s consent, may instruct that the error remains, in which case ‘an appropriate deduction may be made from the Contract Sum’ (cl 2.9). There is no suggestion in the conditions as to how this might be assessed. In practice, it will be a matter for negotiation, based on the anticipated losses to the employer through, for example, the resulting reduction in value of the property plus any costs in professional fees for redesign. The error and the deduction should first be discussed with the employer, and the agreed deduction should ensure adequate compensation.
5.12 Information shown on the information release schedule must be supplied at the stipulated date. Failure to provide the information covered by clause 2.10 causes delay, an event for which an extension of time may be granted (cl 2.20.6) and may give rise to a direct loss and/or expense claim where the failure causes such loss or expense (cl 4.17.4). It could also be grounds for termination, but only where such failure has led to the suspension of the carrying out of the whole of the works for a continuous period that is stated in the contract particulars – if not stated, the period is two months – (cl 8.9.2.2). The obligation is qualified by the proviso ‘Unless prevented by an act or default of the Contractor or any Contractor’s Person’ (cl 2.10). An act or default of the contractor might include, for example, failure to provide design documents as required by the contract and which the contract administrator needs to finalise part of the design.
5.13 There is no mechanism whereby the contract administrator may unilaterally adjust the schedule following an extension of time, for example. Such adjustments may be negotiated and agreed by the parties (cl 2.10), and it may be necessary to do this on a regular basis, keeping the contract administrator involved (the contract allows the employer and contractor to agree changes to the information release schedule under clause 2.10). Parties should tackle this co-operatively, and note that the contract states that such agreement should not be unreasonably withheld. For example, if variations have been issued that involve additional work and have resulted in an extension of time, or if work has been omitted and an earlier completion date fixed, then it would be reasonable for the schedule to be adjusted to reflect these circumstances. If the contractor refuses to agree to an adjustment, the document will become worthless with respect to assessing extensions of time.
5.14 With respect to information not shown on the schedule, or where a schedule is not used, the contract administrator is under an obligation to provide ‘such further drawings or details as are reasonably necessary to explain and amplify the Contract Drawings and shall issue such instructions … as are necessary to enable the Contractor to carry out and complete the Works’ (cl 2.11.1). It is suggested that this obligation would extend to both amplification of information in the contract documents and providing full information regarding any variation that is required to be carried out. The inclusion of the word ‘reasonably’ suggests that the contractor can be expected to obtain some detailed information, for example manufacturers’ fixing information. The contract administrator should be careful, however, in respect of leaving decisions to the contractor, as it may not always be possible to hold the contractor responsible should a detail or fixing fail.
5.15 The information and instructions should ‘be provided at the time the Contractor reasonably requires them, having regard to the progress of the Works’. However, there is no need to supply them any earlier than would be necessary to allow the contractor to complete by the completion date (cl 2.11.2). (It should be noted that the contract administrator may, however, have a more onerous obligation under its terms of engagement.) There is no general requirement for the contractor to apply for information in writing, but if the contractor has ‘reason to believe that the Architect/Contract Administrator is not aware’ of when information may be needed, the contractor should advise the contract administrator (cl 2.11.3). In practice, such advice may frequently be in the form of a programme indicating dates when information is required. As above, failure to provide the information and instructions under clause 2.11.1 would constitute a relevant event under clause 2.20.6 and a relevant matter which may give rise to a direct loss and/or expense claim under clause 4.17.4, and possible grounds for termination under clause 8.9.2.2.
5.16 Under IC16 there is no provision for other consultants to issue information direct to the contractor; this would have to be done through the contract administrator. Delay in supplying necessary drawings by other consultants would therefore have the effect under the contract of a delay on the part of the contract administrator, i.e. a delay for which the employer is responsible. An obligation to supply information on time would normally be implied into the terms of engagement of any consultant, if not expressly set out (Royal Brompton Hospital v Frederick Alexander Hammond).
Royal Brompton Hospital National Health Service Trust v Frederick Alexander Hammond and others (No. 4) [2000] BLR 75
The Royal Brompton Hospital (RBH) engaged Frederick Alexander Hammond to undertake a £19 million construction project on a JCT80 standard form of contract. The contractor successfully claimed against RBH, including for losses suffered due to delays. RBH commenced proceedings against 16 defendants, who were all members of the professional team. A trial date was fixed to deal with a number of different issues, all of which were settled except for one relating to the consulting M&E engineers, Austen Associates Ltd (AA). The issue was whether AA was obliged to provide co-ordination and builder’s work information so as to ensure that RBH complied with clause 5.4 of the main contract. The court decided that AA was under a duty to use reasonable skill and care in ensuring that the drawings were provided in time to enable the contractor to prepare its installation drawings, and thus to carry out and complete the works in accordance with the contract conditions.
Information to be provided by the contractor
5.17 The contractor may be required to provide information in regard to CDM Regulations requirements and, in the case of ICD16, in relation to the completion of design for which the contractor is responsible, under the contractor’s designed portion of the works. It should be noted, however, that IC16 does not contain express provisions for ‘as-built’ drawings. If these are needed, the specific requirement must be set out in the bills and specification.
5.18 The contractor as ‘Principal Contractor’ may be required by the principal designer to provide information in relation to the health and safety file (regulation 12(7) and cl 3.18.2). If the contractor is acting as ‘Principal Designer’ then, under regulation 12(5) and (6), it is required to prepare and deliver the health and safety file to the employer.
5.19 ICD16 contains additional provisions regarding the submission of the developing design by the contractor. This information is essential in order for the contract administrator and employer to monitor the development of the design and to integrate it with the rest of the works. The contractor must provide the contract administrator with ‘such Contractor’s Design Documents as are reasonably necessary to explain or amplify the Contractor’s Proposals’ (cl 2.10.2) and (whether or not requested) ‘all levels and setting out dimensions which the Contractor prepares or uses for the purposes of carrying out and completing the Contractor’s Designed Portion’ (cl 2.10.2.2).
5.20 ‘Contractor’s Design Documents’ are defined as ‘the drawings, details and specifications of materials, goods and workmanship and other related documents and information prepared by or for the Contractor in relation to the Contractor’s Designed Portion (including such as are contained in the Contractor’s Proposals or referred to in clause 2.10.2), together, where applicable, with any other design documents or information to be provided by him under the BIM Protocol’ (cl 1.1).
5.21 In practice, there could be differences of opinion as to what information may be ‘reasonably necessary’. The information that the contractor may need to actually construct the work may differ from the information that the employer and contract administrator would like to receive. If specific information is needed, then it may be sensible to include a schedule of information required in the employer’s requirements.
5.22 As regards timing, the information is to be provided ‘in accordance with the Design Submission Procedure’, and ‘the Contractor shall not commence any work to which such a document relates before that procedure has been complied with’ (cl 2.10.3). The ‘Design Submission Procedure’ is defined in clause 1.1 as ‘such procedure as is specified by the BIM Protocol or, where that is not applicable, the procedure set out in Schedule 6, subject to any modifications of that procedure specified in the Contract Documents’.
Schedule 6 procedure
5.23 The design submission procedure (Schedule 6) states that the documents should be submitted ‘by the means and in the format stated in the Employer’s Requirements’. It also states that documents must be submitted ‘in sufficient time to allow any comments of the Architect/Contract Administrator to be incorporated’ (Schedule 6:1) and refers to ‘the
Figure 5.1 Procedure for submission of design documents
period for submission … stated in the Contract Documents’ (Schedule 6:2). It would therefore be open to the employer – and on most projects it would be wise – to include detailed requirements regarding scope, format and timing of submissions in the contract documents.
5.24 Following submission of a contractor’s design document, the contract administrator must respond within 14 days of the date of receipt, ‘or (if later) 14 days from either the date or expiry of the period for submission of the same stated in the Contract Documents’ (Schedule 6:2) (in other words, if the contractor supplies information earlier than any agreed date, the contract administrator would not be required to respond any earlier than stated in the contract documents).
5.25 The contract administrator is entitled to take three alternative courses of action (see Figure 5.1); it can accept the contractor’s design document, in which case it should return it marked ‘A’. It may accept it, subject to certain comments being incorporated, in which case it should be marked ‘B’. Or it can make comments and require the contractor to resubmit the document with the comments incorporated for further approval, in which case it should be marked ‘C’ (Schedule 6:5). In the case of marking B or C, the contract administrator must state why the document does not comply with the contract (comments are only valid if the document does not comply (Schedule 6:2) – if it does comply, any required alteration would constitute a variation). If the contract administrator does not respond within the specified period, it is deemed to have accepted the document (Schedule 6:3).
5.26 Schedule 6:8.3 states that no comments or any action by the contract administrator will relieve the contractor of its liability to ensure that the document complies with the contract, or that the project complies with the contract. This has the effect that if the contractor incorporates a comment made by the contract administrator then it accepts that the comment has been properly made (i.e. it identifies a way in which the design document is not in accordance with the contract).
5.27 If the contractor disagrees with a comment and considers that the document complies with the contract, it is required to inform the contract administrator, within seven days of receipt of the comment, that compliance with the comment would give rise to a variation (Schedule 6:7). The contractor must give reasons justifying its opinion. The contract administrator must either confirm or withdraw the comment within seven days. The confirmation or withdrawal is stated not to signify that the employer accepts that the contractor’s design document complies or that the comment represents a variation (Schedule 6:8.1) – this would be a question of fact, if necessary to be resolved by adjudication. The contractor would have to implement the comment and argue its case later.
5.28 If the contractor does not notify the contract administrator of its disagreement with a comment, then the comment will not be treated as a variation, even if it could be later shown in fact to be a variation (Schedule 6:8.2).
Information to be provided by the named sub-contractor
5.29 If ICSub/NAM/E is executed, the named sub-contractor will have an obligation to provide information to the contract administrator in accordance with any time requirements set out in Schedule 1 of the ICSub/NAM/E contract particulars or separate document to the form (cl 1). This information is stated under clause 1.1 to be for the purposes of either coordinating the design with that of the main contract (cl 1.1.1), obtaining the main contract tenders or instructing the expenditure of a provisional sum relating to the named subcontractor (cl 1.1.2), or to enable the contract administrator to issue information to the main contractor (cl 1.1.3). The clause also requires the named sub-contractor to supply ‘such further information as the Contract Administrator’ may reasonably require. As discussed above, it would be wise to set out in Schedule 1 as much detail as possible about the type of information and timing of submission, to avoid any disagreements later as to what it might be reasonable to require.
5.30 The sub-contractor would be directly liable to the employer for any breach of the obligation to provide information, and the employer would therefore be able to bring a claim against the named sub-contractor for any losses suffered. It is notable that there are no terms in the main contract which expressly relieve the main contractor of liability, but as there are no terms requiring the contractor to provide information, it is very unlikely that the employer could claim losses from the main contractor. Any risk of late named sub-contractor information holding up progress would be borne by the employer through the operation of the extension of time and disruption provisions.
5.31 This named sub-contractor’s obligation to provide information is subject to the employer providing information according to any dates agreed under Schedule 1 to ICSub/NAM/E or as may reasonably be required (cl 1.3). This means that, if the information is not provided according to the Schedule 1 dates, the employer will not be able to bring any claim against the named sub-contractor for losses suffered. If calendar dates are agreed, there are no means of adjusting them should the main contractor’s (and consequently the sub-contractor’s) programme be delayed. In practice, therefore, it may be better to relate those dates to work stages rather than calendar dates.
Contract administrator's instructions
5.32 Only the contract administrator has the power to issue instructions. Sometimes the contract administrator ‘may’ issue instructions (e.g. instructions requiring a variation under clause 3.11) but at other times the contract administrator ‘shall’ issue instructions (e.g. instructions regarding discrepancies between contract documents under clause 2.13). The latter is an obligation. If the employer gives an instruction other than through the contract administrator this would not be effective under the contract. The contractor would be under no obligation to comply with any such instruction. If the contractor, however, does carry out the instruction, a court might decide either that there had been an agreed amendment to the contract, or that the instructed work is not part of the contract but a separate agreement between the contractor and the employer. The consequences of such an agreement would be difficult to resolve in practice and the employer would be very unwise to make such agreements or issue any instructions other than through the contract administrator.
5.33 Where the contract administrator acts outside its authority, the contractor would be under no obligation to comply with the instruction given. On the other hand, provided that the contract administrator is acting within the terms of the contract, the contractor must comply, even if the contract administrator’s action is contrary to the express requirements or instructions of the employer.
5.34 All instructions must be in writing and sent in the format and by the means which the parties ‘have agreed or may from time to time agree in writing’, which could include electronic communications (cl 1.7.2). If no means have been agreed, instructions may be sent by ‘any effective means’ (cl 1.7.3), and will be considered ‘duly served’ if sent by the methods set out in 1.7.3.1 and 1.7.3.2. It should be remembered that it may also be necessary to prove when an instruction has been received, and therefore it is advisable to send a hard copy by recorded delivery or to record receipt of instructions at a subsequent progress meeting.
5.35 The provisions make no reference to oral instructions, which would therefore be of no effect. The contractor would not be obliged to comply with any oral instruction and would be wise to request all instructions to be confirmed immediately in writing before taking action. If the contractor carries out a variation on the basis of an oral instruction only, then the contract administrator could later sanction the instruction in writing (cl 3.11) but the contractor would have taken a risk (MOD v Scott Wilson Kirkpatrick). The contract contains no provisions to cover the situation where the contractor confirms an oral instruction in writing; however, it might be wise to respond promptly, reminding the contractor of the correct procedures under the contract.
Ministry of Defence v Scott Wilson Kirkpatrick [2000] BLR 20 (CA)
Scott Wilson Kirkpatrick (SWK) was engaged as structural engineer and supervising officer by the MOD in relation to refurbishment of the roof at Plymouth Dockyard under GC/Works/1. Several years after the works were complete, wind lifted a large section of roof and deposited it in a nearby playing field. The contract had required 9–12in. nails, but the contractor had used 4in. nails. The supervising officer had been party to discussions regarding the use of the 4in. nails, but neither he nor the contractor could remember very clearly when these discussions happened, or exactly what had been said. The Court of Appeal decided the evidence was sparse and vague, and declined to find that there was any instruction under 7(1)(a) or 7(1)(m) (instructions that may be given orally), or that there had been any agreement as to the replacement. Even if the supervising officer’s conduct amounted to confirmation or encouragement, this could not absolve the contractor of its duty to fix the purlins in a workmanlike manner. The MOD was therefore entitled to insist on its strict contractual rights. The Court of Appeal noted, however, that an instruction in writing was not a condition precedent to a claim by the contractor, so long as it was able to prove that the change had been agreed.
5.36 No special format is required for instructions, but it is good practice to have a system of numbered instructions in a standard format, and it is often convenient to use the forms published by RIBA Publishing. An instruction in a letter would nevertheless be effective, even if the normal practice on that project was to use the printed forms, as long as the letter is quite clear. A drawing sent with a letter requiring it to be executed would constitute an instruction, but a drawing with no covering instruction may be ineffective.
5.37 Instructions in site meeting minutes may constitute a written instruction if issued by the contract administrator, but not if issued by the contractor, and only if the minutes are recorded as agreed at a subsequent meeting. It is possible that the instruction would not take effect until after the minutes were agreed, and it would depend on the circumstances whether the minutes were sufficiently clear to fall within the terms of the contract. It is therefore not good practice to rely on this method. Site instruction books should also be avoided. Signing an instruction in a book would constitute a written instruction under the terms of the contract, but there is no obligation to sign such books, and it may be prudent not to make quick decisions on site but to wait until all implications can be checked. With the possibility of emailed instructions the delay should be very short.
Table 5.5 Matters about which the contract administrator is empowered to issue instructions
5.38 The contractor must comply with every instruction (see Table 5.5) provided that it is valid, i.e. provided that it is in respect of a matter regarding which the contract administrator is empowered to issue instructions (cl 3.8). The contractor must ‘forthwith’ comply, which for practical purposes means as soon as is reasonably possible. There are two exceptions to this obligation; the contractor need not comply with a clause 5.1.2 instruction (access and use of the site, etc.) to the extent that it makes a reasonable objection (cl 3.8, or 3.8.1 in ICD16), and the contractor need not comply where it believes that the instruction ‘would adversely affect the efficacy’ of the contractor’s design (cl 3.8.2, ICD only, see paragraph 5.47).
5.39 If the contractor feels that a contract administrator’s instruction might not be empowered by the contract, or requires clarification, then the contractor may ask the contract administrator to specify in writing the provisions of the contract under which the instruction is given, and the contract administrator must do this ‘forthwith’ (cl 3.10). (To avoid this happening, it is good practice always to name the clause under which the instruction is empowered.) The contractor must then either comply or issue a notice referring the disputed instruction to the decision of an adjudicator. If, however, the contractor chooses to accept the contract administrator’s reply and complies with the instruction, then the employer is bound by the instruction. This would appear to be the case even if it is established at a later stage that the contract administrator had no authority under the contract.
5.40 Even if the contractor decides to query the instruction under clause 3.10, this does not relieve the contractor of the obligation to comply. Should the instruction be found to be valid, the contractor would be liable for any delay caused by failing to comply as required by the contract. If the contractor does comply, but the instruction turns out to have been invalid, the contractor may be entitled to any losses incurred through compliance. The contractor would have to make a commercial decision regarding whether to comply or await the outcome, but the contract administrator would be wise to deal promptly with any such query.
5.41 If the contractor does not comply with a written instruction, the employer may employ and pay others to carry out the work to the extent necessary to give effect to the instruction (cl 3.9). The contract administrator must have given written notice to the contractor requiring compliance with the instruction, and seven days must have elapsed after the contractor’s receipt of the notice before the employer may bring in others. This suggests that some recorded form of delivery is desirable. Although there is no obligation to issue such notices, it would be prudent to take swift action in order to protect the employer’s interests. The employer is entitled to recover any additional costs from the contractor, i.e. the difference between what would have been paid to the contractor for the instructed work and the costs actually incurred by the employer (the amount is deducted from the contract sum; cl 4.9.3). These costs could include not only the carrying out of the instructed work but any special site provisions that would need to be made, including health and safety provisions, and any additional professional fees charged. Although it would be wise to obtain alternative estimates for all these costs wherever possible, if the work is needed urgently there would be no need to do so.
Variations
5.42 Contract administrators’ instructions often require some variation to the works. Under common law neither party to a contract has the power unilaterally to alter any of its terms. Therefore, in a construction contract neither the employer nor the contract administrator would have the power to require any variations unless the contract contains such a power. As some aspects of construction may be difficult to define exactly in advance, most construction contracts contain provisions allowing the employer to vary the works to some degree. Changes can arise because of unexpected site problems, or because of design changes required by the employer, or because the contract administrator has to change information issued to the contractor.
5.43 Under IC16 the contract administrator is empowered to order specific variations (cl 3.11.1). The power is broadly defined and includes alterations to the design, quality and quantity of the works, and to operational restrictions such as access to the site. The contract expressly states that no variation will vitiate the contract (cl 3.11.4, or 3.11.5 in ICD16) but the power does not extend to altering the nature of the contract, nor can the contract administrator issue variations after practical completion. All variations under clause 3.11 may result in an adjustment of the contract sum (cl 4.3.1) and give rise to a claim for an extension of time (cl 2.20.1), or for direct loss and/or expense (cl 4.17.1). If the works are suspended for a period of two months, or any period stated in the contract particulars, as a consequence of the variation, this would be grounds for the contractor to terminate its employment under the contract, unless the variation was necessitated by some negligence or default of the contractor (cl 8.9.2).
5.44 The contract administrator may vary the works, e.g. by changing the standard of a material specified. The contract administrator may add to or omit work, or substitute one type of work for another or remove work already carried out (cl 3.11 and 5.1.1). The contract administrator may vary the access to or use of the site, limitations on working space or working hours, the order in which the work is to be carried out, or any restrictions already imposed (cl 3.11 and 5.1.2). However, with respect to clause 5.1.2 variations, the contractor need not comply to the extent that it makes reasonable objection (cl 3.8). Given that the contractor will be paid for such variations it is difficult to see what might constitute a ‘reasonable’ objection, but, for example, a variation might have a detrimental knock-on effect on some other project, causing the contractor to suffer losses for which it would not otherwise be compensated or might involve an instruction that would make site operations almost impossible to manage. This contract provision is necessary not only to allow the employer some flexibility, but also to accommodate difficulties that may arise, for example through local authority restrictions on working hours.
5.45 The contract administrator may issue an instruction to postpone work (cl 3.12). Any such instruction may give rise to a claim for an extension of time (cl 2.20.1) or direct loss and/ or expense (cl 4.17.1), and if the postponement results in a suspension of work for a period greater than that stated in the contract particulars, then the contractor would have grounds for terminating its employment. The consequences of such an instruction are therefore serious, and the contract administrator would advise any client who is suggesting such a measure accordingly. It is difficult to envisage a situation where it would be necessary to postpone work, but it could arise where there have been problems with regard to statutory approval, or in reaching agreement over a boundary matter, and the only option might be to postpone the relevant part of the works.
5.46 Finally, the contract administrator may sanction any variation made by the contractor other than under an instruction of the contract administrator (cl 3.11.3). If such a variation were likely to affect the employer, the contract administrator would be wise to discuss it with the employer before taking action.
Variations to the contractor's designed portion
5.47 Clause 3.11.3 (ICD only) states that where an instruction requires a variation in respect of the contractor’s designed portion, it shall be ‘an alteration to or modification of the Employer’s Requirements’. This would appear to prevent the contract administrator from requiring changes to the proposals after the contract is entered into, including to any further design details that are developed as the contract progresses, except in the case where the developing design does not meet the employer’s requirements. If the contract administrator issues any instruction which, in the contractor’s opinion, may affect the efficacy of the design, the contractor must object within seven days of receiving the instruction, specifying the adverse effect (cl 3.8.2). The instruction will not then take effect until confirmed by the contract administrator.
Goods, materials and workmanship
5.48 Clause 2.1 makes it clear that all work must be carried out in accordance with the standard specified in the contract documents. The contract administrator will normally inspect at regular intervals to monitor the standard that is being achieved. If any changes were made in order to raise or lower the standard then this would constitute variation. When the standard achieved appears to be unsatisfactory, it can be tempting to become involved in directing the day-to-day activities of the contractor on site. Apart from being an enormous burden on the contract administrator, this could confuse the issue of who is ultimately responsible for quality and is to be avoided. The contract administrator would normally, of course, draw the contractor’s attention to areas of defective or poor-quality work. There are also some measures set out in the contract, as detailed in the following section.
Defective work
5.49 The contract administrator may instruct the contractor to open up completed work for inspection, or arrange for testing of any of the work or materials, fixed or unfixed (cl 3.14). Obviously, the contract administrator would only do this if there are reasonable grounds for suspecting defective work or materials. No time limit is specified, but the contract administrator should instruct as soon as the need for such action becomes apparent (delay could result in escalating or unnecessary costs). Failure to ask for tests, however, in no way relieves the contractor from the obligation to provide work according to the contract. The contract administrator should explain to the employer the need for the tests and their contractual implications. The cost of carrying out the tests is added to the contract sum, unless it was already provided for in the bills of quantities under a provisional sum, or unless the work proves to be defective. Unless the work is defective the contractor may also be entitled to an extension of time under clause 2.20.2.3 and loss and/or expense under clause 4.17.2.3.
5.50 If work is found to be defective, the contractor must write to the contract administrator proposing action to be taken immediately to establish whether there are any similar problems in work already carried out. If the contract administrator has not received proposals within seven days, or is not satisfied with the contractor’s proposals, or cannot wait seven days to receive the proposals, the contract administrator can instruct that further tests or opening up be carried out (cl 3.15.1). In this case the cost of further tests would be borne by the contractor, whether or not the additional tests demonstrated work to be defective. The contractor has a right of objection, which must be made within ten days of receipt of the instruction (cl 3.15.2) but, whether or not it exercises this right, it must comply with the instruction immediately. Following the objection, the contract administrator may either withdraw the instruction or modify it – if neither is done within seven days of the objection, and the matter cannot be resolved, it is referred to one of the contractual dispute resolution procedures (cl 3.15.2).
5.51 The contract administrator has the power to issue an instruction requiring the removal of work, materials or goods from the site (cl 3.16.1). Even though this might appear rather excessive considering that the contractor is already under an obligation to build the work correctly, it can be important to issue such instructions as they enable the clause 3.9 sanctions to be brought into operation (Bath and NE Somerset DC v Mowlem). To fall under clause 3.16.1, the instruction must specifically require removal of the work from site, however impractical. Simply drawing attention to the defective work would not be sufficient (Holland Hannen v Welsh Health Technical Services).
Bath and North East Somerset District Council v Mowlem plc [2004] BLR 153 (CA)
Mowlem plc was engaged on JCT98 (Local Authorities With Quantities) to undertake the Bath Spa project. Completion was expected to be in 2002 but work was still under way in 2003. Paint applied by Mowlem to the four pools began to peel, and the contract administrator issued architect’s instruction no. 103 which required Mowlem to strip and repaint the affected areas. Mowlem refused to comply and the Council issued a notice under clause 4.1.2. Mowlem still did not comply, and the employer engaged Warings to carry out this work. Mowlem refused Warings access to the site, and the Council applied to the court for an injunction, which was granted. Mowlem appealed against the injunction, but the appeal was dismissed.
Mowlem had argued that it was able to rectify all the defects and that the liquidated damages provided under the contract were the agreed remedy for delays caused. The Council was able to show that the liquidated damages were not adequate compensation for the losses suffered. Lord Justice Mance held that, in such cases, the court should examine whether the liquidated damages would provide adequate compensation and, if they would not, as in this case, it is appropriate to grant an injunction. In reaching this decision he took into account irrecoverable losses such as the ‘unquantifiable and uncompensatable damage to the Council’s general public aims’.
Holland Hannen & Cubitts (Northern) Ltd v Welsh Health Technical Services Organisation (1985) 35 BLR 1 (CA)
Cubitts Ltd was employed by the Welsh Health Technical Services Organisation (WHTSO) to construct two hospitals at Rhyl and Gurnos. Percy Thomas (PTP) was the architect. Redpath Dorman Long Ltd (RDL) was the nominated sub-contractor for the design and supply of precast concrete floor slabs. RDL assured WHTSO that the floors would be designed to CP 116 (concerning deflection), but the design team later required RDL to work to CP 204. Following installation, the contractor complained about extra work and costs due to adjustments to the partitions necessitated by excessive deflection of the floors, and it was established that they had been designed to CP 116 not CP 204. PTP sent three letters ‘condemning’ the floors, but the first did not mention clause 6(4), and none of them required removal of the work. Cubitts stopped work for 20 weeks until PTP issued instructions specifying how the defect should be resolved. Cubitts commenced proceedings claiming compensation for delay. The claim was settled, but the relevant parties maintained their proceedings against each other for contribution. The Official Referee decided that RDL was liable for two-thirds of the amount paid to Cubitts and the design team for one-third. The Court of Appeal decided that this was incorrect and the correct apportionment should have been that RDL was liable for one-third and the design team for two-thirds. In reaching this conclusion it stated: ‘PTP contributed very substantially to the delay which occurred, in failing to recognise the defect in the design at an earlier stage; by issuing an invalid notice in 1976, and by moving very slowly thereafter to take the necessary steps to have the defects in the flooring put right’ (Robert Goff LJ).
5.52 There are no express provisions in IC16 whereby the defective work, materials or goods can be allowed to remain – if this is required it would need to be covered by an instruction authorising a variation. It is essential to secure the employer’s consent and agree a reasonable reduction in the contract sum with both parties. The contract administrator must specify in writing exactly which work may remain and record the agreed deduction. If variations to other work become necessary as a consequence it should be agreed (again following consultation with the employer and contractor) that no addition is made to the contract sum and no extension of time or direct loss and/or expense is given in respect of these subsequent variations. The contract administrator should strongly advise the employer against accepting any defective work that could later cause technical problems or be a source of irritation. The difficult case of Ruxley Electronics v Forsyth illustrates that it may not be possible to claim the cost of having the work rebuilt at a later date.
Ruxley Electronics and Construction Ltd v Forsyth (1995) 73 BLR 1 (HL)
Mr Forsyth employed Ruxley Electronics to build a swimming pool. The drawings and specification required the pool to be 7ft 6in. deep at its deepest point, but the completed pool was only 6ft 9in. deep. The contractors brought a claim for their unpaid account and Mr Forsyth counterclaimed the cost of rebuilding the pool, which would be £21,560. The trial judge found that the shortfall in depth did not decrease the value of the pool and that Mr Forsyth had no intention of building a new pool. He rejected the counterclaim but awarded £2,500 as general damages for loss of pleasure and amenity. Mr Forsyth appealed and the Court of Appeal allowed the appeal and awarded him £21,500. The contractor appealed and the House of Lords restored the original ruling, confirming that the cost of reinstatement is not the only possible measure of damages for defective performance of a building contract and is not the appropriate measure where the expenditure would be out of all proportion to the benefit to be obtained.
Non-compliance with clause 2.1
5.53 Clause 2.1 requires the contractor to carry out the work ‘in a proper and workmanlike manner’ and in accordance with the construction phase plan. Clause 3.16.2 states that, in the event of any failure, the contract administrator may issue instructions requiring compliance, and these will not result in any addition to the contract sum, nor will they entitle the contractor to any extension of time or direct loss and/or expense. The clause empowers the contract administrator to intervene in the contractor’s working methods if necessary.
Sub-contracted work
5.54 IC16 provides for two methods of sub-contracting work, both allowing for some control over which firms the contractor uses.
Domestic sub-contractors
5.55 Under clause 3.5 the contractor may only sub-contract work (including CDP work) with the written consent of the contract administrator. Under clause 1.11, however, the contract administrator’s permission cannot be unreasonably delayed or withheld. It is suggested that permission is required for each instance of sub-letting, rather than agreeing to subletting in principle.
5.56 As discussed in paragraph 2.28, the JCT publishes a suite of sub-contract forms for use with domestic sub-contracts, including situations where the sub-contractor is to undertake design, but neither IC16 nor ICD16 requires that any particular form is used. Whatever form of domestic sub-contract is used, however, it must include certain conditions, and clause 3.6 states the sub-contract must provide that:
- the sub-contractor’s employment is terminated immediately upon termination of the contractor’s (cl 3.6.1);
- unfixed materials and goods placed on the site by the sub-contractor shall not be removed without the contractor’s written consent (cl 3.6.2.1);
- it shall be accepted that materials or goods included in an interim certificate that has been paid by the employer become the property of the employer (cl 3.6.2.1.1);
- it shall be accepted that any materials or goods paid for by the contractor prior to being included in a certificate become the property of the contractor (cl 3.6.2.1.2);
- the sub-contractor will provide access to work as required by clause 3.1 (cl 3.6.2.2);
- each party will comply with its obligations under the CDM Regulations (cl 3.6.2.3);
- the sub-contractor has a right to interest on late payments by the contractor at the same rate as that due on main contract payments (cl 3.6.2.4);
- if the rights particulars provide for warranties from the sub-contractor, the sub-contractor shall execute and deliver warranties as required (cl 3.6.2.5);
- the sub-contractor shall provide information and grant licences reasonably necessary for the contractor to fulfil its obligations under clauses 2.32 and 3.18 and/or as required under the BIM protocol (cl 3.6.3).
5.57 These clauses protect the position of the employer, and the provisions regarding unfixed goods and materials are of particular importance in this respect. If a main contractor should sub-contract on other terms, and this results in losses to the employer, then the contractor may be liable as this would be a breach of contract.
Named sub-contractors
5.58 The provisions for naming of sub-contractors are set out in clause 3.7 and Schedule 2. The sub-contractor can either be named in the contract bills/specification/work schedules, in which case the firm must have been selected prior to tendering the main contract, or in an instruction regarding a provisional sum. The latter route gives more flexibility to the employer but requires the employer to accept more risk.
5.59 Where the sub-contractor is named in the tender documents, the contractor must be provided at the time of tender with ICSub/NAM with the first two sections (ICSub/NAM/ IT and ICSub/NAM/T) completed, documents referred to as ‘the Tender Documents’ that describe the work, which might include, for example, drawings and bills of quantities or specifications, together with a copy of the construction phase plan (if and to the extent available), and a copy of the executed ICSub/NAM/E. (A deed might be preferable where design work is involved, but there should be consistency between all documents.) Where the sub-contractor is named in an instruction relating to a provisional sum, the same information must accompany the instruction.
5.60 In order to collate this information, the contract administrator must first invite sub-contract tenders using ICSub/NAM. Included is the invitation to tender (ICSub/NAM/IT), to be completed and signed by the contract administrator, before it is sent to the invited subcontractor. ICSub/NAM/IT contains such important items as the ‘dates between which it is expected that the sub-contract work will be carried out’, insurance and VAT arrangements and dispute resolution matters. If ICSub/NAM/E is being used this should be completed and sent at the same time. (Note that ICSub/NAM/E will include details of collateral warranties to be provided by the named sub-contractor to purchasers, tenants and funders.) The sub-contractor then completes ICSub/NAM/T and ICSub/NAM/E (in part – detailed guidance notes are given in the form), and returns both to the contract administrator. If the offer is acceptable, the employer executes ICSub/NAM/E, which then forms a binding agreement.
5.61 There is an alternative procedure for use in situations where insufficient information is available to request a firm tender for the works, but the employer wishes to enter into a warranty. ICSub/NAM/E can be sent on its own (in this case with the appropriate part of the fourth recital deleted, or fifth recital in ICD16) and the sub-contractor submits an approximate estimate for the works. The warranty is executed on this basis, and a firm tender sought on ICSub/NAM/E when more information is available.
5.62 Where the sub-contractor is named in the main contract documents, the contractor will price this work when submitting its tender. The contractor must then enter into an agreement with the named person within 21 days of entering into the main contract with the employer. The agreement is made using the third section of ICSub/NAM/T, which refers to the sub-contract conditions ICSub/NAM/C (cl 3.7 and Schedule 2) (ICSub/ NAM/C itself does not have to be executed). If the contractor is unable to enter into a sub-contract in accordance with the particulars in the main contract documents, the contractor must immediately inform the contract administrator of the particulars that have prevented this from happening (Schedule 2:2). The contract administrator must then issue an instruction which could either ‘change the particulars so as to remove the impediment’ (Schedule 2:2.1), or omit the work, substituting a provisional sum if wished (Schedule 2:2.3). It is suggested that, with the exception of cases where a named sub-contractor’s employment has been terminated, the main contractor could not be required to carry out work which the tender documents stated were to be undertaken by a named (or to be named) sub-contractor.
5.63 An instruction under Schedule 2 paragraphs 2.1 and 2.2 is to be treated as a variation under clause 3.11, which may give rise to a claim for an extension of time, and also be a matter with respect to a claim for direct loss and/or expense (although this would be unlikely where the work is omitted). An instruction under Schedule 2 paragraph 2.3 is dealt with in accordance with Schedule 2 paragraph 5, i.e. as an instruction relating to a provisional sum, and therefore could also give rise to an adjustment of the contract sum, and an award of an extension of time or direct loss and/or expense. In addition, as with any instructions, if the contract administrator does not issue the necessary instructions promptly, this could give rise to claims under clauses 2.20.6 and 4.17.4 (delay or disruption due to failure to issue necessary instructions) and, where the works are suspended by two months or a period stated in the contract particulars as a consequence, to termination by the contractor. It is suggested that this would only apply where the contract administrator has failed to act within a reasonable time (Percy Bilton Ltd v Greater London Council). It is clear, however, that the risk of a problem arising while finalising the sub-contract details is borne in part by the employer, and it may be prudent for the contract administrator to check before the main contract tender is accepted that there appear to be no outstanding matters to be resolved before the sub-contract can be formed, particularly in cases where a considerable period has elapsed since the named person’s tender was sought.
Percy Bilton Ltd v Greater London Council (1982) 20 BLR 1 (HL)
Percy Bilton Ltd contracted with the Greater London Council (GLC) for the provision of 182 dwellings. W J Lowdell Ltd was nominated to carry out mechanical services but, after commencing the work, withdrew its labour and went into liquidation. A second firm was then nominated, but this company withdrew its tender. Finally, a third firm was nominated and a subcontract was entered into. The contractor claimed an extension of time which was only granted in part, and the contractor then brought proceedings for the return of liquidated damages that had been deducted. The GLC claimed that the problems of renomination were covered in clause 23(g) (delay on the part of a nominated sub-contractor) and therefore the extension of time and the deduction of liquidated damages was valid. Percy Bilton claimed that clause 23(g) did not cover that situation, which amounted to a breach on the part of the employer. The House of Lords found that clause 23(g) did not cover the situation, but that withdrawal alone did not constitute a breach by the employer. The risk of delays caused by withdrawal lay with the contractor. However, the employer had a duty to renominate within a reasonable time, and failure to do so could constitute a relevant event under clause 23(g) (failure to issue necessary instructions).
5.64 Where the sub-contractor is named in an instruction relating to a provisional sum, the contractor may make reasonable objection to the named sub-contractor, but must do so within 14 days of the date of issue of the instruction (Schedule 2:5). Otherwise, the contractor must enter into the sub-contract, using documents as described above. The contract does not say what will happen if an objection is made; if the objection is reasonable the contract administrator would have to name another person in a further instruction, or issue instructions to remove the impediment as described above. If a dispute arises this could be referred to adjudication. The instruction naming the subcontractor is to be valued under the rules in clause 5.2. Delays arising from compliance with the instruction would be grounds for an extension of time under clause 2.20.2.2 and loss/expense under clause 4.17.2.2 and, as above, delays in issuing the instructions could give rise to claims under clauses 2.20.6 and 4.17.4, or even to termination.
5.65 Once the sub-contract is entered into, the contractor is entirely responsible for the work carried out by the sub-contractor, and delays on the part of the sub-contractor are not grounds for an extension of time or direct loss and/or expense. Responsibility for payment also rests entirely with the contractor. The contract administrator is therefore not concerned with the details of the sub-contract terms, and the contractor is not required to send a copy of the executed ICSub/NAM/A to either the contract administrator or the employer. If the contract administrator would prefer to have a copy, then the contract should be amended accordingly.
5.66 Under certain circumstances the contract administrator may be obliged to name a replacement sub-contractor. This could occur if the named sub-contractor’s employment is terminated by the contractor or the named sub-contractor terminates its own employment (Schedule 2:7). The termination procedures are discussed at paragraphs 9.35 to 9.40 below.
Work not forming part of the contract/persons engaged by the employer
5.67 Under clause 2.7 the employer may engage persons direct to carry out work that does not form part of the contract, while the main contractor is still in possession. This may include statutory undertakers when employed by the employer, but not where they are carrying out the work in pursuance of their statutory duties. If the contract documents have included this requirement, then the contractor must permit the employer to execute such work. Otherwise the employer can only do this with the contractor’s consent. The consent may not be unreasonably delayed or withheld.
5.68 Clauses 6.1 and 6.2 make it clear that for the purposes of insurance the contractor is not responsible for the directly engaged person. The employer should therefore ensure that insurance cover is arranged in respect of any act or neglect of the persons to be employed. The employer should also be made fully aware that any disruption caused to the contractor’s working could lead to a claim for an extension of time (cl 2.20.6), to loss and expense (cl 4.17.4), or even to the contractor terminating its employment under the contract (cl 8.9.2.2). The employer is therefore at considerable risk and should be advised to avoid this route if at all possible.
Making good defects
5.69 Following the rectification period the contractor is required to make good any ‘defects, shrinkages or other faults … which appear and are notified by the Architect/Contract Administrator to the Contractor’ (cl 2.30). The defects are limited to those that result from the works not having been carried out in accordance with the contract. This does not include other defects that may be due, for example, to errors in the design information supplied to the contractor, or to general wear and tear resulting from occupation by the employer, or shrinkages which would be expected even if the works had been carried out as specified. The contractor is similarly not liable for frost damage that occurs after practical completion.
5.70 The obligation does not appear to be limited to those defects that appear after practical completion, and therefore could extend to defects that were patent at that time (note that the wording differs from that in SBC16). It is suggested that the obligation would include defects caused by frost occurring before practical completion.
5.71 However, it is important to note that the obligation to make good appears to be limited to those defects notified by the contract administrator. It is therefore important that the contract administrator prepares a comprehensive schedule. The contract administrator should issue the notification not later than 14 days after the end of the rectification period, the only point where the contract requires the contract administrator to issue such a schedule. The contract administrator may require the contractor to make good a defect at an earlier stage, but this should only be used for serious and urgent problems. No special format is required for the notification, but it is common practice to issue it in the form of an instruction.
5.72 If the contract administrator, with the agreement of the employer, decides to accept any defective work then this should be confirmed by means of an instruction and an amount is deducted from the contract sum (cl 2.30 and 4.9.3). Care should be taken to establish the full extent of the problem before such a course of action is taken, and an appropriate deduction from the contract sum agreed, as it is unlikely that the employer would thereafter be able to claim for consequential problems or further remedial work.
5.73 Once satisfied that all the notified defects have been made good, the contract administrator must issue a certificate to that effect (cl 2.31). The certificate is one of the preconditions to the issue of the final certificate. Note that a separate certificate will be needed for the ‘Relevant Part’ if the partial possession provisions have been brought into operation (cl 2.27), and that separate certificates will be needed for each section if the sectional completion provisions have been used.
5.74 The contract does not state what should happen in respect of defects that appear after the issue of the certificate but before the issue of the final certificate. It is, however, clear from clause 2.30 that the contract administrator no longer has the power to instruct that these are made good. It is suggested that in such circumstances there would be two possible courses of action. The first would be to make an agreement with the contractor to rectify the defects before the final certificate is issued. If the contractor refused to do this, an amount could be deducted from the contract sum to cover the cost of making good the work, but this would involve some risk to the employer. The second and less risky course would be to have the defective work rectified by another contractor, and deduct the amount paid from the contract sum. This would involve a delay in the issue of the final certificate and would probably be disputed by the contractor.
5.75 The contractor’s liability for defective work does not end with the final certificate, except to the limited extent in which the final certificate is conclusive. The contractor is still liable for losses suffered, but no longer has the right to return to site to correct defective work. The employer’s remedy is to bring an action at common law. The rectification period therefore is a sensible procedure that benefits the parties in affording an opportunity to remedy problems at a reasonable cost, without the problems associated with bringing a legal action. Nevertheless, if the contract administrator fails to notify the contractor of patent defects, although the contractor would still be liable for any defects, if particular difficulty is experienced in getting these remedied at a later date, then the employer may look to the contract administrator for compensation for any losses.